When I finally made the big decision to start my own LLC, I celebrated by popping a bottle of champagne. This is when my lawyer Elliott Stapleton told me there were more steps involved in creating an LLC than just making the decision to start one. I told him that I was ready to complete these steps, but he thought it would be better if we waited until the bottle of champagne I just drank wore off.
The next afternoon we began the important process of setting up a separate legal entity in order to secure the limitation of liability of my personal assets from the liabilities of the business. When I hear the word ‘entity’ I think of aliens coming in their spaceship to abduct me, but that’s probably because I watch too much Sci-Fi channel and then can’t sleep. Elliott explained that the entity he was referring to was a necessary legal entity for the business and that I could come out from hiding underneath the desk. To create this entity we first registered the Articles of Organization with the Ohio Secretary of State. Then we made the necessary tax filings, and obtained the proper federal, state, and local authorizations. And by ‘we’ I really mean Elliott did all of these things while I played with the various colored paper clips and rubber bands on his desk. Elliott informed me that failing to follow the proper protocols after registration with the state would result in the loss of a company’s limited liability status, and that there was a common misconception that filing with the state alone limits personal liability. I could tell Elliott really loved his work because the stuff he spoke passionately about was really boring to me. When Elliott had completed this process, he assured me that now my personal assets as owner were separate from the company, and that the limitation of liability was in full effect. I thanked him and assured him that I would buy him more paper clips if I could keep the paper clip spaceship that I had created with the rubber band ‘entities’ inside. Later when my wife asked me how the business was coming along, I told her about the entities in my paper clip spaceship, and I could tell that she was also relieved that I had Elliott’s legal guidance through this process. For more information on starting your business, read Starting a Business: Part 1. For the next step in starting your own business, read Starting a Business: Part 3. Everyone dreams of being their own boss one day. If I was my own boss, I’d give myself lots of vacation days and an air hockey table in the break room, which would be my living room. Basically I just want an air hockey table in my living room. Unfortunately, going into your boss’s office and sitting at her desk and drinking from her coffee mug is not truly being your own boss, and will likely just get you in trouble too. The most realistic way to become your own boss is to start a successful business. I have had aspirations to start my own business since I was a little kid selling protection to the kids on my street with the lemonade stand. They would pay me a small fee and I would keep their stand safe from lemonade thieves, bullies and other lemonade competition. I later found out that this is called extortion, and is not a great business model. In order to protect myself from falling into similar traps or prison I had to seek out Elliott Stapleton’s guidance to get my business started on the right path. I was told that the most important parts of starting a business are the goods or services that I want to offer. This was problematic because I had only thought about how I wanted people to give me money, and I skipped the part about what to actually sell. Once I landed on which services to offer, I had to decide how to set up my business. I chose a limited liability company (LLC) for several reasons. Liability is a word that really gets my attention, especially when my 7th grade basketball coach says I’m a liability and leaves me on the bench. When I think of liability in business I think of money, and more specifically, losing money. In an LLC, each owner is called a member of the LLC and therefore has limited personal liability when it comes to the company’s monetary losses. That way, if your business loses money or owes money, nobody can come take your personal hard-earned air hockey table. However with an LLC the company’s losses can be passed through to a member’s individual tax return! There is nothing like reaping the benefits of failure, such as not having to shower after basketball games because I didn’t sweat sitting on the bench.
If unlike me your company actually earns money, an LLC allows the owners to distribute profits in any way they choose, regardless of capital contributions. These are just a couple of benefits of starting an LLC. The process of starting an LLC is somewhat involved, and is something I will discuss in my next article. For now I have a hankering for some lemonade and a game of air hockey for some reason. For the next step in starting your own business, read Starting a Business: Part 2. On several occasions this winter I was able to spend my work commute thinking about how my wife and I really need to get a Last Will and Testament. As I drove into work, the roads covered in snow and ice, dodging cars as they spun past me, I would often ponder what would happen to my daughter if one of the two spare tires I currently have on my car suddenly gave out, sending me crashing into one of the overturned snow-plows littering the side of the streets.
To help ward off anxiety during these death-defying commutes I would also contemplate which job I could get that would allow me to sit at home on days that the road is covered in so much snow that I could be driving on someone’s front lawn and not even realize it. Or even better, contemplating which skill set I possess that could make me rich by posting a video on YouTube so I never have to work again. Obviously driving in snowstorms is not one of these skills. My wife and I have debated whom we would appoint as guardian for our daughter. My wife believes we should select an individual or married couple from within our own family, but I feel that Oprah Winfrey would make a more suitable provider given her wealth of experience and money. Then I found out the potential guardian should know about our plans, and more importantly, can decline the guardianship. I sent a letter to Oprah to gauge her willingness to raise my daughter, but I have not heard back from her (she’s very busy gaining more wealth!) Speaking of wealth, not everyone is excellent at keeping track of money or making wise money choices. As I’ve mentioned in a previous article, with a Revocable Living Trust it is possible to designate a guardian for your children and also designate a separate person to manage the money. In my case, I’m fairly certain the guardian we select will be able to manage a checking account with $25 in it. I have also learned that if we do not designate a guardian, or if Oprah (or whomever we agree on) does not accept the guardianship, anybody can apply! This would leave the court to decide who would be our daughter’s guardian. That means literally anyone, including the creepy guy at the bus stop, or his imaginary friend he is always talking with, could apply for guardianship of my daughter. That is an even scarier prospect than driving in a snowstorm, unless you are driving in a snowstorm with the creepy guy from the bus stop in your passenger seat. The only way to avoid this scary, uncertain scenario is to decide on a guardian, notify that person, and seal the deal with a Last Will and Testament. And also don’t offer the creepy guy at the bus stop a ride because it is snowing so hard outside. If you have any questions on the information contained in this blog, see the estate planning website of Cincinnati attorney, Elliott Stapleton, with CMRS Law, 123 Boggs Lane, Cincinnati, Ohio 45246, or contact him at (513) 334-0099. My wife and I decided that our first home purchase should be a beautiful, old (circa 1902) brick home in the city of Cincinnati. We learned very quickly that buying a 106-year-old home had its drawbacks. The first time I had to unclog the shower drain, I realized the hair I pulled out could have belonged to President William Howard Taft, but the antique dealer said it was gross and unlikely.
Now that our family is growing, we have considered moving into a larger, newer home. The question that remains is what to do with our current home? It turns out that there are a few options when buying and selling Real Estate in Ohio. The first step is obvious. Find people who don’t mind that the main staircase is so creaky that when I go for a late night glass of water, it wakes my whole family and the neighbor’s dog. I’ve considered installing a rope-swing to avoid this problem, but was advised that it may hurt my home’s resale value. Agree to disagree. The next important step is choosing the type of Real Estate transaction. The options are a Purchase Agreement, a Land Installment Contract, or a Lease with an Option to Purchase. The Purchase Agreement is the most common way to buy or sell Real Estate. A purchaser makes an offer and the seller either accepts or counter-offers. When I bought my house this way, I made a counter-offer with the stipulation that the seller should fix the creaky stairs. They said no. While a Land-Installment Contract sounds like something that people fought over in the Wild West, in reality it is a contract that allows the purchaser to pay the seller the purchase price over an extended period of time. The length of time and purchase price are agreed upon by both parties involved. For example, when Michael Jordan put his mansion up for sale, I proposed a Land-Installment Contract where I would pay him $1 per year for 29 million years. I have yet to hear back from MJ. Lastly, a Lease with an Option to Purchase gives a tenant the option to purchase the Real Estate at any time during the agreement. In the meantime, the rent payments do not count toward the purchase price. In other words, you could pay me $1,000 a month for five years to lease my house, creaky stairs and all. At any time during those five years, if you decide you really love how cold the house gets in winter because of its original windows, you could purchase my house for $150,000. With all of its flaws, our little house really is beautiful and I am sure someone will find it perfect as we once did. In the meantime, I am going to see if Michael Jordan just wants a straight-up trade. If someone walked up to me today and handed me a check for $300,000 I would do many things with that money, after of course I finished the lengthy and awkwardly affectionate hug I would give that person. After paying off some high-interest debt I would look to the future, which would include starting an account for my one-year-old daughter's future college plans. My wife mentioned starting a large wedding fund, but I told her it is unlikely that my daughter will ever get married because I’m not going to let her talk to any boys after she turns 5. With all of the future planning that would take place in this scenario, I had to consider another important, though somber, scenario. What if my wife and I are not around anymore? What happens to these plans? This is where Elliott's guidance was helpful. I learned that even if I had life insurance to cover the difference, what happens to this money is a sobering reality. The reality is that at the age of 18 my daughter would receive all of these assets, including the aforementioned check for $300,000. If I received a check for $300,000 at the age of 18, I would currently own the original animatronic T-Rex from the movie Jurassic Park. While I still think this would be a really cool conversation piece in our living room, I now believe paying for education, healthcare, and other life essentials is much more important. The alternative to trusting a teenager with hundreds of thousands of dollars is to create a Revocable Living Trust. This Trust will only distribute assets for the essentials in life, including education, healthcare and support, until the child reaches a more mature age. Another benefit of this Trust is the option to designate a guardian for a child in a Will, and a separate trustee to handle the money. This way if you have someone who would be great at raising kids but might try to buy the original animatronic Jurassic Park T-rex with the money, it is possible to split up these duties. The sad reality is that nobody has given me a check for $300,000 yet. The good news is that with my current assets, life insurance and Revocable Living Trust, I know my daughter will be taken care of in a responsible and loving way no matter what the future has in store for me. If you have any questions on the information contained in this blog, see the estate planning website of Cincinnati attorney, Elliott Stapleton, with CMRK Law, 123 Boggs Lane, Cincinnati, Ohio 45246, or contact him at (513) 334-0099. For blended families, it is especially important to proactively plan to protect your children and spouse.
This article explains why planning is necessary and solutions to ensure a fair outcome. http://www.ohio-estate-planning.com/asset-protection-for-blended-families.html For every parent, picking a Guardian is an important and necessary decision. Here is a video that provides guidance: Taking a Vacation without the Kids? Have you Appointed a Person to Authorize Medical Treatment?6/13/2014
Why is this Important? Have you planned a getaway for just the "grown-ups"? If you are arranging a trip and leaving your children with grandparents or a family friend, have you considered what authority the caregiver will have in a medical emergency? What is the Solution? If you leave your children (or are a person taking care of the children), it is necessary to have a Temporary Authorization to Approve Medical Treatment signed by both parents. Putting this Temporary Authorization in place will save parents from cutting their vacation short over an ear infection or a sore throat. More importantly, this Temporary Authorization will ensure the person you put in charge can do everything needed to protect your children. How can you Create this Authorization? Typically this authorization would be created by your Attorney to ensure you understand the limitations on the Caregiver's authority. In addition, it is a good idea to ensure your Will, Power of Attorney, and Estate Plan are up-to-date before taking your trip. How long does it take to update or create a Will and Estate Plan? After the initial free consultation, it typically takes 2-4 weeks. It is possible to expedite if you have an upcoming vacation or short timeline. In the initial consultation, we will discuss your goals, options for achieving those goals, and the flat rate for services. Why is this important? If you own a home or rental property, it is important to understand the potential risks associated with snow and ice removal. Is it safer to not shovel? There is a common assertion among property owners that not shoveling your sidewalk or property carries less liability than removing the snow and ice. This, like most overly general statements, is not true. The concept stems from a misunderstanding about liability and the risks associated with owning property. While it is true, if you decide (or have a contractual duty) to shovel, you must do so in a reasonable manner that does not create additional risk. But it seems hard to imagine how removing snow and putting down salt could create more risk. When can you be liable for injury? The build-up of snow and ice is categorized as a natural phenomenon. If a person is injured because of a natural phenomenon, the law requires, at the very least, some evidence of an intervening act by the property owner that aggravates a hazardous presence of ice or snow. An intervening act would likely result from a property owner’s action or inaction prior to the accumulation of snow; such as leaving a garbage can lid on the sidewalk or not repairing a damaged gutter which produces an excessively dangerous accumulation of ice. Courts have also held that an owner or occupier of land owes no duty to warn invitees of open and obvious danger. To be open and obvious, a hazard must not be concealed and must be discoverable by ordinary inspection. If the danger were covered by snow would it be open and obvious? Removing snow and ice allows you (or your snow removal company) to uncover what may otherwise be hidden and hazardous conditions. By uncovering hidden dangers you are either removing them from being a danger or making them open and obvious. Conclusion Unless your shoveling skills are so bad that you create hidden dangers, it is best to shovel. Without shoveling, potential dangers will remain hidden. |
Elliott Stapleton Attorney with CMRS Law
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